Japanese state-funded hotel deal pays rent to Myanmar Defense Ministry

TOKYO (Reuters) – A consortium of Japanese private companies and a Japanese public entity paid rent for a multi-million dollar hotel and office space that was ultimately handed over to Myanmar’s Defense Ministry, six told Reuters business and government officials.

A construction site for a large-scale complex called Y Complex by Japanese companies is seen on the land that once housed the Military Museum in central Yangon, Myanmar on March 2, 2021. Photo taken on March 2, 2021. REUTERS / Stringer

This is the first time that Japan recognizes that the project benefits Myanmar’s Defense Ministry, which is controlled by the military under the country’s constitution. The payments, as of 2017, are not illegal but are potentially embarrassing for Japan given that United Nations investigators have alleged human rights violations by the Burmese military. Reuters could not determine the amount of rent actually paid to the Defense Ministry.

Officially known as Tatmadaw, the Burmese army is under investigation for genocide by the International Court of Justice for its offensive against Rohingya Muslims in 2017. The army seized control of the country during the attack. a coup on February 1 and has since detained the country’s elected leader and killed more than 261 protesters.

Myanmar’s Defense Ministry and the military junta could not be reached for comment. Myanmar’s military has declared its actions against the Rohingya to be “mine clearance operations” targeting militants, and the government has dismissed accusations of human rights violations and genocide as false. The junta has blamed the killings since the coup on the protesters themselves, accusing them of arson and violence.

Complex Y, built on army-owned land near Shwedagon Pagoda in Yangon, is just one of many assets and projects linked to the Burmese military, which ruled the country for most of the years. Last 60 years.

The military controls two conglomerates with interests ranging from mining to banking. Some foreign investors have forged partnerships with conglomerates over the past decade as Myanmar’s democratic government tried to open up the country’s economy.

Each party to the Y Complex deal told Reuters they believed the rent, which was paid through an intermediary, ultimately went to the Myanmar government, not the military.

Ryota Nagao, an official with the international political division of Japan’s Land Ministry, which approved the state agency’s investment, said the ministry ruled that the project did not deal with the military “directly or indirectly ”because the Defense Ministry was a government ministry. He declined to comment on the fact that Myanmar’s defense department is controlled by the military, under the country’s 2008 constitution, drafted under the previous military regime.

Japanese construction firm Fujita Corp said in a 2017 press release that the Yangon project, turning a former military museum into a complex of posh offices, shops and a five-star hotel, would cost $ 330 million. .

Fujita, property manager Tokyo Tatemono Co and Japanese state investment company JOIN, overseen by Japan’s Land Ministry, told Reuters they had formed a consortium that paid the rent for the land on which the complex is located. built. The Japan Bank for International Cooperation (JBIC), a state-owned company, said in 2018 that it was helping finance the project.

Fujita, Tokyo Tatemono and JOIN declined to comment on the amount of rent paid and the amount that ended up with the Myanmar Defense Ministry.

Chief Cabinet Secretary Katsunobu Kato, the Japanese government’s top spokesperson, acknowledged JOIN and JBIC’s involvement in the Y Complex project, through a special purpose company. In response to questions from Reuters, he said he understood that neither entity had any direct business relationship with the Burmese military.

Fujita initially said the project would be completed in 2020. Construction was put on hold after the coup due to worker safety concerns, said JOIN, 95% owned by the Japanese government. Representatives from each of those parties told Reuters that the rent payments were made through its local partner Yangon Technical and Trading (YTT), a subsidiary of the private Burmese conglomerate Ayeyar Hinthar which has an interest in agriculture, the bank , health and real estate.

Kyi Tha, an official at YTT, said the site is leased by the Defense Ministry and the ultimate beneficiary is the Myanmar government. He said no special measures had been taken to assess the Burmese military’s human rights record. It is not a requirement under laws or regulations.

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Chris Sidoti, who has studied the economic interests of the Burmese military for the United Nations, said Complex Y was the only example he had found of an army-related project involving foreign government entities.

Each of the Japanese state entities and companies declined to comment on the terms of the deal, which was approved by Myanmar in 2017. A treasure trove of so-called official Myanmar documents leaked last month and uploaded by Distributed Denial of Secrets (DDoSecrets), which describes itself as a whistleblower website, says the resort’s rent is around $ 2 million a year over 50 years. Reuters could not independently verify the terms of the deal or how much the military is actually expected to receive.

Documents on the DDoSecrets website show that a Japanese investor-controlled project company, Y Complex Company, agreed to pay $ 1.8 million out of a total of $ 2.2 million in rent to the Ministry of Defense, through an intermediary account, every year from 2019. The rest was to be paid by YTT, according to the documents. For 2017 and 2018, known as the construction phase, the project company agreed to pay a lower amount of $ 500,000 out of $ 573,160 in annual rent, according to documents. Reuters could not determine how much rent was actually paid to the Defense Ministry.

JOIN, Fujita and Tokyo Tatemono paid $ 1.8 million in rent in 2019 for the project, according to the audited accounts of a Singaporean holding company formed by them for the Y Complex project. The filing with Singapore’s business regulator does not say who the rent was paid to. Each of the three companies that made up the entity declined to comment on this figure.

Japan is the fifth-largest investor in Myanmar, injecting $ 1.4 billion into the country over the past five years, according to Myanmar’s Directorate of Investment and Business Administration. Japanese officials said the country’s ties to Myanmar, which also include aid donations, academic exchanges and medical and disaster relief training for its military, help counter the growing influence of the China in the region.

The revelations about economic ties to the Burmese military could put more pressure on Tokyo and Japanese companies to abandon them, according to human rights groups. Last month, days after the coup, Japanese brewer Kirin cut a beer business with Myanmar Economic Holdings Ltd, one of two conglomerates owned by the Burmese military, saying it was “deeply concerned” about the recent actions by the military, referring to the coup, which he said were contrary to its human rights standards and policy.

“This will have serious repercussions on the reputation not only of JOIN and JBIC, but also of Japan as a country,” said Akira Igata, national security expert at Tama University. “Japan risks being seen as a country that will continue to do business with human rights violators.

In early March, the US Department of Commerce imposed sanctions on Myanmar military-controlled ministries of defense and interior, claiming they were responsible for the coup. The US Treasury Department also imposed sanctions on Myanmar Defense Minister Mya Tun Oo and his predecessor, Sein Win, among others.

Justice for Myanmar, Human Rights Watch, and other pressure groups on February 17 called on a United Nations human rights body to investigate the Y Complex’s links to the military. A spokeswoman for the United Nations Human Rights Working Group said she received the petition, but declined to comment further.

Yoshihiro Kubo, an official who manages Myanmar’s affairs for JOIN, declined to comment on the future of his involvement with Y Complex. He described the situation as “painful and difficult” but did not give details.

Japan’s Ministry of Finance, which oversees the JBIC, addressed questions to the JBIC. JBIC said its loans for the project comply with Japanese laws and global sanctions, and that it is monitoring the situation in Myanmar.

JBIC said in a 2018 press release that Japanese banks Mizuho Bank and Sumitomo Mitsui Banking Corp will also provide loans to the project. The two declined to comment.

Fujita and Tatemono both said in statements sent by email that they would “keep an eye on the situation” while considering future measures.

Reporting from Ju-min Park in Tokyo and John Geddie in London Additional reporting by Tetsushi Kajimoto and Antoni Slodkowski in Tokyo and Reuters staff Editing by Bill Rigby

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